ONGC to cut operational cost as crude slumps to 12-year low

With oil prices slumping to 12- year low, state-owned Oil and Natural Gas Corp (ONGC) plans to cut operational cost by at least 10 per cent by prioritising activities and putting off the less important ones to future.

ONGC plans to hire a consultant to suggest cost cuts and controlling operating expenditure as Brent falling to $31 per barrel almost equals to the company’s cost of production of every barrels of crude oil, sources with direct knowledge of the development said.

The company’s cost of producing every barrel of crude oil is $36 and after including return on investment as well as taxes and levies, the cost comes to $51.52 per barrel.

The slump in oil prices to 12-year low will means that ONGC pays less royalty and assuming the government lowers its Rs 4,500 per tons burden of cess, the cost of production will come to about $30 per barrel.

This compares to realisation of $30-32 per barrel in the current quarter, just about squaring off the cost.

Sources said the company has already initiated measures to cut avoidable expenditure and is putting money only in priority tasks or activities needed to sustain its oil and gas exploration and production.

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